After all, without cash -- money in a liquid account you can withdraw immediately without penalty -- you can't seize fleeting market opportunities. But those opportunities are only worth pursuing if they "fit into your overall investing plan," cautions Craig Bartlett, vice president and division consulting manager for U.S. Bancorp Investments, based in Minneapolis.

It's likely counterproductive to scan the market for potential bargains with a sum you are itching to invest. Bartlett recommends first defining the types of market opportunities that best advance your investing goals so you can move fast for the right reasons. Then, design your cash pool accordingly.

As a matter of functional money management, it is smart to have a cash account set up as a parking spot for money flowing in and out of your portfolio. Ahmad Adnan, a certified financial planner with Ameriprise Financial Services, based in Austin, Texas, says brokers call this a "sweep" account because it's used to sweep money in and out of investments. That's especially useful if you expect to be directing funds to several types of investments over a period, or, conversely, rolling money from maturing or performing holdings into a pool of money for a purchase.

The sweep account could be set up as a money-market account, short-term certificate of deposit in an FDIC-insured institution, or a similar account, Adnan explains.

"Don't expect to make any money with it," he adds. "Clients ask, 'What's the cash earning?' and the answer is 'nothing.' " He and other advisers agree that with interest rates so low, cash accounts are lucky to reap even a fraction of a percentage point.

That doesn't make much of a difference when you are parking cash for a few months or a couple of years in anticipation of a major purchase, such as a house down payment. In fact, advisers agree, it's smarter to table the funds in a cash account than risk losing some of it in an equity investment. The rule of thumb, they agree, is that if you need a certain amount of money on a certain date, keep the money in a cash account. "Cash is for short-term circumstances," Adnan says.

The flip side is that the longer the cash languishes in the sweep account, the greater the chance you will start to lose money thanks to inflation, advisors say.

If inflation is at 2 percent, and you're earning zero percent, "then you've lost 2 percent of your purchasing power," says David A. Frisch, president and founder of Frisch Financial Group, based in New York. "People think of cash as a riskless asset, but it's not."

His recommendation: For any goal two years or more in the future, try to capture some return. "The shorter the time horizon, the less return you need. The longer the horizon, the more you should be thinking about capturing return," Frisch says. An interim step might be to buy 10-year Treasury bonds, which are currently yielding about 2.1 percent, he adds. Those at least keep pace with the current inflation rate.

As you fine-tune your cash strategy, consider these points:

If your portfolio is large enough, you might allot as much as 10 percent of your conservative investments to cash. "This diversifies the conservative portion of your portfolio," says Paul Jacobs, chief investment officer with Palisades Hudson Financial Group, based in Atlanta. "You can maybe take a little more risk with bonds."

Be sure you know in advance if you'll be dinged for transaction fees to move the cash from a maturing instrument to a holding account.

Forecast your likely financial moves with a cash holding account in mind. If you are likely to be rebalancing or shifting assets around, "you might need to have a decent amount of cash on hand," Jacobs says. If are working toward a major purchase several years out, "ladder your instruments so all the money is available at the right time," Bartlett says. With various accounts maturing in succession, you can roll them into the cash account in an orderly fashion. ""Match the maturity for the purchase date for when you need the money. You want to actually allow a couple extra months for the transition, so do it early," Bartlett says.